Professional Documents
Culture Documents
Submitted By:Ankush Saxena Gulshan Mahanvi Tyagi Parul Sirohi Prashant Sharma
Group-2, Sec-B,MBA 1ST YEAR
School Of Management
KINGFISHER AIRLINES
Vijay Mallya is looking at reports of Q3 of 2008 , thinking that can there be any way to at least break even in this critical time of economic slowdown. Aviation industry is very sensitive industry triggered hard by the recession across the world. Kingfisher reports Rs. 592.96 crore net loss (from exhibit1) for the quarter ended 31st December 2008. Indian aviation sector is buckling under rising fuel prices & manpower costs and falling air traffic. Sales stood at Rs 1,447 crore versus Rs 1,353 crore, in line with Jet Airways, which also posted a net loss of Rs 214 crore for the quarter under review because of poor load factors. The company claimed that technically, the financial results for the third quarter cannot be compared with the corresponding quarter because the Vijay Mallya-led Kingfisher was not listed last year and this years result include figures of erstwhile Air Deccan, which Kingfisher took over last year. High fuel and other operating costs coupled with lower load factors contributed to the losses at Kingfisher, an industry observer said. On the operational front, Kingfisher saw corporate traffic being hit during the quarter because of the economic slowdown. Yields and front-end load factor also suffered The full impact of the price reduction in aviation turbine fuel will lower the airlines operating costs, the spokesperson added.
CURRENT PROFILE
IATA
IT
ICAO
KFR
Callsign
KINGFISHER 2002
Bengaluru International Airport
Founded
Hubs
( Primary Hub)
Chhatrapati Shivaji International Airport
( Secondary Hub)
Indira Gandhi International Airport
( Secondary Hub)
Focus cities Ahmedabad Chennai Hyderabad Kolkata
Mr. Hitesh Patel, EVP Mr. Rajesh Verma, EVP Mr. A. Raghunathan, CFO
HISTORY
Kingfisher Airline is a private airline based in Bangalore, India. The airline is owned by Vijay Mallya of United Beverages Group. Kingfisher Airlines started its operations on May 9, 2005 with a fleet of 4 Airbus A320 aircrafts. The destinations covered by Kingfisher Airlines are Bangalore, Mumbai, Delhi, Goa, Chennai, Hyderabad, Ahmedabad, Cochin, Guwahati, Kolkata, Pune, Agartala, Dibrugarh, Mangalore and Jaipur. In a short span of time Kingfisher Airline has carved a niche for itself. The airline offers several unique services to its customers. These include: personal valet at the airport to assist in baggage handling and boarding, exclusive lounges with private space, accompanied with refreshments and music at the airport, audio and video on-demand, with extra-wide personalised screens in the aircraft, sleeperette seats with extendable footrests, and three-course gourmet cuisine.
CURRENT SCENARIO
Kingfisher Airlines currently operates with a brand new fleet of 8 Airbus A320 aircraft, 3 Airbus A319-100 aircraft and 4 ATR-72 aircraft. It was the first airline in India to operate with all new aircrafts. Kingfisher Airlines is also the first Indian airline to order the Airbus A380. It placed orders for 5 A380s, 5 A350-800 aircrafts and 5 Airbus A330-200 aircrafts in a deal valued at over $3 billion on June 15, 2005. With the sign of trouble in aviation industry, Kingfisher airlines and Jet airways (used to be competitors), formed alliance (October, 2008) to significantly rationalize and reduce costs and provide improved standards and a wider choice of air travels options to consumers with immediate effect Kingfisher airline has won global awards at the SKYTRAX World Airline Awards ceremony held recently in Hamburg , Germany(2009). Air France KLM is in talks with Jet Airways and Kingfisher Airline for having a code-share agreement .The conclusion of this agreement
could help passengers , especially from smaller cities ,to travel further on the network of these global airline. Kingfisher Airlines has launched Five Star Privileges ,an exclusive program that entitles guests to avail of great deals at partner establishment around the country. Kingfisher Airlines captures market share with strong passengers in February 2009 as per the latest ministry of Civil Aviation data. Kingfisher Airlines has deferred deliveries of some Airbuses (EAD,PA) aircraft, wary of overcapacity as airlines struggles to cut costs to offset high fuel prices and softer demand. The Airline , a unit of alcoholic drinks maker UB Group , has negotiated with Airbus to defer deliveries of 32 A320-family aircraft to 2010-2012 from2008/09, Kingfisher, which owns discount carrier Deccan Aviation DECA.BO, has five A380 super jumbos on order , scheduled for delivery from 2012 , as well as 20 A350 Aircraft scheduled for delivery from 2013. It also has a further 20 A330/200 aircraft on order , making it one of the single largest stakeholders in the Airbus order backlog by number of planes. Indigo ,paramount Mull joining Jet Airways (India) limited and Kingfisher Airlines Ltd ties up Kingfisher Airlines Ltd plans to sell 25% stake to allow foreign airlines to invest in domestic carriers, with a cap of just below 26%. Kingfisher Airlines Ltd in talks to lease out two of its Airbus A330 planes to Nigerias Ank Air. Recently, it has announced management change . Air India has rejected the Jet Airways(India) Limited-Kingfisher Airlines Ltd offer to join their Alliance. Deccan aviation Ltd has changed its name to Kingfisher Airlines Ltd. Private air carrier Kingfisher Airlines has inked an agreement with Citibank Cards which allows members of its 'King Club' holding the bank's cards redeem their points for flights on Kingfisher Airlines or its partner airlines. King Club is the airline's frequent-flyer programme. "The association will benefit members of King Club, the frequentflyer programme of Kingfisher Airlines and Citibank cardholders who are King Club members
SWOT ANALYSIS
KINGFISHERS STRENGTHS
Superior product on ground; in the air Jet business class is being equated with Kingfishers economy UB group backing for raising financing Well capitalised airline, prepared to take losses Better handling of employees and staff; less centralised style of functioning Chairman Mallyas grand vision where it is looking to be among the best in the world The Deccan deal which gives it market share, a new market segment and was cheap
KINGFISHERS WEAKNESSES
Kingfisher is yet to build itself into an organisation; structures yet to fall in place Not as professionally run as Jet; yet to build a professionally competent team Mallyas knowledge of the sector does not parallel Goyals Chairmans people skills are better but employees have to work very erratic hours Unable to leverage connections to the same extent while lobbying Kingfishers loads are lower than Jets, which could be a reflection of its marketing and sales ability
OPPORTUNITIES
Under penetrated domestic market International market Untapped air cargo market Expanding tourism industry Fleet size expansion
THREATS
Existing Operators Infrastructure issue
Check-in Counter:
1 2
1 2 3 - -
1 2 3 4 -
Flight Attendants:
1 2 3 4 -
1 2 3 - -
1 2 3 4 -
Seating Space:
1 2 3 - 1 2 3 4 -
1 2 3 - -
Punctuality:
1 2 3 4 -
1 2 - - -
1 2 3 - -
PEST ANALYSIS
Political Factors
Ecological/Environmental Issues
Current Legislation Future Legislation Regulatory Bodies And Processes Government Policies Government Term And Change Trading Policies
International Pressure Groups Economic Home Economy Situation Overseas Economies And Trends General Taxation Issues Seasonality/Weather Issues Interest And Exchange Rates
Social Factors
Lifestyle Trends Demographics Consumer Attitudes And Opinions Media Views Law Changes Affecting Social Factors Brand, Company, Technology Image Major Events And Influences Sound Pollution Plane hijacking
9/11 Incident
Technological Factors
manufacturing maturity and capacity information and communications technology legislation innovation potential technology access, licensing, patents intellectual property issues modernization of aircrafts modern tehnology like cat3 and ils
Economical Factors
Economic meltdown Overall growth of the company Operating cost Capital Airlines acquisition/leasing cost Rising income level Reduced fare but yet not enough
Airlines Kingfisher Jet airways+Jet Lite Air India Indigo Spice Jet Go Air
Paramount
1.8
STRATEGIC PARTNERS
1. Kingfisher Airlines Inks Strategic Alliance with American Express. Partners launch Indias first Airline Corporate Charge Card Program Fast track Corporate Savings with exclusive Rebates, Discounts, and Employee Rewards with King Club and Bonus Points. 2. Strategic and operational alliance with rival domestic carrier Jet Airways owned by Naresh Goel in 2009.
Functional strategies
It planned to re-launch its commercial air service called UB Airway again which it had to withdraw it due to government restrictions. The company gave best services to its customers that were like providing world class interiors, and in-flight entertainment systems. The company came up with only one class airlines rather than other airlines that had Business Class; Economy Class the idea was to combine Business Class experiences and Economy Class experiences in one. Having a single class freed up more leg space for passengers when compared to normal economy class flights. The company started addressing its customers as GUEST rather than passengers. The company made its mark by providing its guests with more legroom and bigger seats so as to provide better comfort. KFA has set its sight to become Indias largest airline both is capacity and in market share.
airport. The Roving Agent is like a check-in counter on the move. You no longer need to go to the check-in counter and wait for long. As part of its promotional strategy the marketing team of KFA showcased the airline as the new flying experience. The following initiatives were taken as part of its promotional strategy Advertisements hoardings at airports depicted the stylish interiors of the Fun liners, which conveyed youthful, fun-filled, and world class image. INOX multiplexes in Mumbai publicized KFAs special offers for a month. KFA was the official travel airlines for the cast and crew of Mangal Pandey- the movie. KFA made use of various fashion shows, celebrity golf matches, New Year parties all to build its Kingfisher brand. The UB groups monthly magazine called Pegasus published information about KFA along with other information related to UB group. KFA launched many attractive offers to promote its sales like the King Card in association with ICICI Bank, in August 2005. This was meant to create loyal customers for KFA by providing benefits like privileged access to lounges, restaurants, free refreshments at airports, access to 180 golf clubs across India, special invites for lifestyle shows. In October, KFA launched Chill Times Offer in the month of August 2005 and September 2005. In October they launched the King Saver Offer which said Fly like a King, dont play like one. KFA targeted the frequent fliers business traveler segment, which was dominated by Jet Airways. By offering a King Saver Booklet, This booklet contained six free flight tickets and was presented as a free gift if the passenger bought two such
booklets each worth Rs. 26,999.Passengers could avail off this offer if they showed there Jet Privilege Member (Gold or Platinum) card.
Financial strategies:
KFA came up with many new financial strategic moves that made it one of the leaders of aviation industry the company had adopted following strategies: The company is planning to spend close to Rs 40 crore on various media and below-the-line marketing activities for the year 2009-10 Cut down the salaries of the staff like trainee pilot now drawing Rs20k as compare to Rs2.0lacs. To come over the financial crisis the KFL is considering an option of retrenchment. It purchased brand new A320 aircrafts powered by the cockpit that was a paperless environment. KFA was first Indian carrier to place an order for A380s.
Expansion strategy
To further its expansion plan KFA put in its bid to buy Sahara in November 2005.How ever negotiation came to a standstill when KFA felt the valuation of Sahara Airlines of around US$750mn to US$1 bn. was too high. KFA has plans to make an Initial Public Offer (IPO) and raise around US$200 mn that would be used for its fleet acquisition and route expansion activities. KFA set up Kingfisher International Inc. (KII), a subsidiary in US for its international operations. KFA plans to operate international routs by end of 2007. But KFA had yet to receive permission from the Indian government. According to Indian government domestic air carriers are not allowed to fly international routes without five year of domestic flying experience. But Mr. Mallya said if he failed to
convince the government to change its rules, it would start an airline in a foreign country and fly it to India.
Recommended Strategies
Should tie up with different state tourism (like Goa, Kerala, Tamil Nadu etc) to promote domestic air traffic. Running online contests to boost traffic Looking at partnering with premium hotels, so that the customers of hotels directly choose Kingfisher airlines for traveling. To minimize the air fuel cost and other operating expenses of aircraft they should purchase new more fuel efficient and advance technology based aircraft. Code sharing with other airlines. Rescheduling of flights so that they can adjust the load. More tie ups are required like they can also be a part of STAR alliance. At the time of recession making collusions and cartels could be a good idea. In such a scenario it is imperative for any airline to build its brand and have a focused marketing strategy and created a new category of Aviation hospitality thus making service and hospitality as main focus.
The company should join hands with certain banks like ICICI, SBI etc. to offer eticketing.
Exhibit:-1
896.9
896.91
682.96
33.73 -28.2
33.73 -44.4
50.27 -3.88
-37.44
-40.83 -28.47
-50.68 -35.59
-11.21 -11.24
-30.72 -32.86